IBF PROJECT – MODULE 2

Company = Lucky Cement Limited

Team Members =
1. Muhammad Palize Qazi - 24027
2. Muhammad Hassaan Imran - 24062
3. Muhammad Azlan Tehseen - 24036
4. Muhammad Hassaan - 24802
5. Saifullah Soomro - 24626
6. Wasaiu Ahmed - 24281

Group 6
SLOT = 6611
m

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EXECUTIVE SUMMARY 3

INTRODUCTION 6

LIQUIDITY RATIOS 7

CURRENT RATIO 7
QUICK/ACID TEST RATIO 7

ASSET MANAGEMENT RATIOS 9

INVENTORY TURNOVER RATIO 9

RECEIVABLE TURNOVER RATIO 9
PAYABLE TURNOVER RATIO 10
FIXED ASSET TURNOVER 10
TOTAL ASSET TURNOVER 11

DEBT MANAGEMENT RATIOS 13

DEBT RATIO 13
TIMES INTEREST EARNED (TIE) RATIO 13

PROFITABILITY RATIOS 15

ROA (RETURN ON ASSETS) 15

ROE (RETURN ON EQUITY) 15
NET PROFIT MARGIN 16
OPERATING MARGIN 17
BASIC EARNING POWER 17
ROIC(RETURN ON INVESTED CAPITAL) 18

MARKET VALUE RATIOS 19

EPS(EARNINGS PER SHARE) 19

P/E RATIO 19
BOOK VALUE PER SHARE 20
MARKET TO BOOK RATIO 21
DIVIDEND YIELD 22
DIVIDEND PAYOUT RATIO 23
DIVIDEND COVER RATIO 24

CONCLUSION 25

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EXECUTIVE SUMMARY
LIQUIDITY RATIOS:
LUCK dominated its competitors in the liquidity ratios for 2018-2022, starting at a high point but later
converging with the ratios for its competitors and the industry average in 2020. MLCF started off with
the lowest ratio in 2018 but had some recovery due to policies of reducing short term borrowings,
and overtook DGKC, which has faced a stable decline.

ASSET MANAGEMENT RATIOS:

Similarly, LUCK stayed consistently above its competitors for the turnover ratios, but the competitors
and industry averages also showed a consistent rise for Fixed asset and total asset turnovers. It is
important to note however, that DGKC had the highest receivable turnover for 2018-2020, but later
faced a decline.

DEBT MANAGEMENT RATIOS:

An uptrend is seen in the debt ratio for all the companies. MLCF has the highest debt ratio and lowest
TIE ratio for the 5-year period, closely, followed by DGKC. LUCK on the other hand has a debt ratio
significantly below the industry average, and a higher TIE ratio. This is due to MLCF and DGKC having
a policy of relying on debt to fund their new projects, in order to accelerate their growth, whereas,
LUCK has a policy of minimal debt.

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PROFITABILITY RATIOS:
LUCK has had the most stable profitability ratios and has been consistently above the industry
average. On the other hand, ratios for DGKC have been consistently below the industry average.
MLCF has had a mix of lows and highs, with it starting off with high ratio in 2018, falling the most by
2020, and yet having the highest increase and overtaking LUCK in 2021.

MARKET VALUE RATIOS:

LUCK dominates most of the market value ratios, with the highest EPS, and a high market to book
ratio. MLCF however, pays the highest dividends and has the highest dividend yield and dividend

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payout for 2018-2020. However, post 2020 it has stopped paying dividends and DGKC remains the
sole company that does.

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INTRODUCTION
This document will go through financial ratios for Lucky Cement Limited (LUCK), DG Khan Cement
limited (DGKC) and Maple Leaf Cement limited (MLCF) which are a few of the largest publicly listed
companies in Pakistan working in the cement production sector.
The following ratios have been discussed in the document. The ratios have been calculated using data
retrieved from annual reports for the years 2016-2022.
1. Liquidity ratios
1.1. Current ratio
1.2. Quick/Acid test Ratio
2. Asset Management Ratios
2.1. Inventory Turnover
2.2. No. of days in Inventory
2.3. Receivable Turnover
2.4. No. of days in Receivables
2.5. Payable Turnover
2.6. No. of days in Payables
2.7. Cash Conversion Cycle
2.8. Working Capital Cycle
2.9. Fixed Asset Turnover
2.10. Total Asset Turnover
3. Debt Management Ratios
3.1. Debt ratio
3.2. Times Interest Earned Ratio (TIE)
4. Profitability Ratios
4.1. Return On total Assets (ROA)
4.2. Return On Common Equity (ROE)
4.3. Net Profit Margin
4.4. Operating Margin
4.5. Basic Earning Power
4.6. Return on invested capital (ROIC)
5. Market Value Ratios
5.1. Earnings per share
5.2. P/E Ratio
5.3. Book Value per share
5.4. Market to Book ratio
5.5. Dividend Yield
5.6. Dividend Payout Ratio
5.7. Dividend Cover ratio

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LIQUIDITY RATIOS

CURRENT RATIO
This ratio measures the extent to which a company’s liabilities are covered by assets that are to be
converted to cash in the near future. The current ratio of all cement industries shows a downward
trend from the financial year of 2018 to 2020. The current ratio reached its lowest point 2020 where
the industry average fell below 1.0 and reached a value of 0.95, meaning that the average current
liabilities of cement industries were greater than their current assets. However, from 2020 the
cement industries have all been on an upward trend with the exception of DG Khan Cement, whose
current ratio fell from 0.94 to 0.91 in 2021 because current assets increased minimally but trade
payables increased by 32%. They have not recovered in the financial year of 2022, as their current
ratio fell more further to 0.90, which means the company is having a hard time meeting its debt
obligations. This happened because even though current assets increased by 11% (mostly driven by
a 46% increase in inventory) and trade payables decreased, but short-term borrowings increased by
37%. It is important to note that despite a big drop between 2018 and 2019, Lucky Cement
maintained a higher current ratio than the industry average throughout the financial years of 2018-
2022 and held a current ratio around or greater than 1.0. This shows that Lucky Cement is successful
at paying short term debts using its assets and has a comparative advantage at managing its liabilities
respective to the rest of the cement industry. On the other hand, DGKC has been consistently below
the industry averages, which may be due to the high short-term borrowings, which is something not
found in the financial statements of LUCK until 2019. By extension, it can also be inferred that the
drop in 2019 for LUCK can be attributed to short term borrowings.

QUICK/ACID TEST RATIO

This ratio measures the extent to which a company’s liabilities are covered by current assets without
having to rely on inventories, which are the least liquid of current assets. The average ratio for the
industry suffers a substantial decline till 2020, after which it has showed an upward trend, reaching
a value of 0.56 in 2022. Just like the Current Ratio, Lucky Cement outperforms the rest of the industry
when it comes to the Quick Ratio, proving that they are able to pay off short term debts without the
need to rely on inventories as much as compared to other cement companies. The ratio for DG Khan
Cement suffers a downward spiral throughout the five years, reaching a value of 0.56 in 2022 as the

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proportion of inventory in current assets has been increasing over these years, whereas the
proportion has been decreasing for LUCK and MLCF. The Quick Ratio for Maple Leaf Cement Factory
has remained well below the industry average throughout the five years, indicating that despite
decreasing proportion, their inventories are still greater than they should be.

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ASSET MANAGEMENT RATIOS

INVENTORY TURNOVER RATIO

The average turnover ratio remains stable throughout the five years, oscillating around a 3.0 ratio.
The inventory turnover ratio has remained greater than the industry average throughout the period
for Lucky Cement, reaching a peak of 3.80 in 2021. Lucky Cement’s high inventory turnover rate
indicates high sales, market share, and performance as compared to the rest of the cement industry.
DG Khan Cement’s inventory ratio starts at an impressive peak of 3.62 in 2019, attributed to their
33% increase in sales from 2018, higher than both LUCK and MLCF, but suffers a big decline through
the next three years, reaching the lowest value of 2.48, relatively lower than other cement
companies. As discussed before, this is because even though sales have increased by 92% from 2017,
but the inventories have increase by 274%. The turnover ratio for Maple Leaf Cement Factory remains
stable except for a major rise in 2020 reaching a peak value of 3.12, after which it dips back to the
normal level. However, it has stably improved over the years due to efforts to solve supply chain and
logistical issues by the company.

RECEIVABLE TURNOVER RATIO

The industry average for this turnover ratio remains stable after the financial year of 2019. In 2018,
the receivables turnover ratio for DG Khan Cement is at a very high ratio of 150.16, meaning that
credit sales were being quickly converted to cash. This is impressive considering DGKC is one of the
largest cement exporters and have sales in the highest number of countries. This influenced the
industry average too, but since 2018 the DGKC turnover ratio has fallen. Excluding 2018, the
receivables turnover ratio for Lucky Cement remains around the industry average, which means
Lucky Cement are moderate at keeping converting receivables to cash effectively as compared to its
competitors, whereas DGKC has reliably outperformed its competitors. This turnover ratio for Maple
Leaf Cement Factory is well below the industry average, indicating a potential weak credit policy with
receivables being held and risk increasing.

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PAYABLE TURNOVER RATIO
Lucky Cement significantly outperforms the rest of the industry, having an inconsistent upward trend
within the five-year period, reaching a peak of 2.57 in 2021. The high ratio indicates that Lucky
Cement is paying off its debt to its suppliers often, which might earn them loyalty, goodwill, and
future discounts. The entire industry suffers a blow in terms of payables turnover ratio in 2019, one
which DGKC does not recover from as their turnover ratio falls below the industry average for the
coming years. The turnover ratio for MLCF is consistently below the industry average, however it is
because of better negotiated credit terms with expansion project suppliers.

FIXED ASSET TURNOVER

The industry average fixed assets turnover ratio is relatively stable throughout the five years, with a
slow gradual decline from the financial years 2018 to 2020 which returns back to the around the
same turnover level by 2022, with an inventory turnover ratio of 1.05. In the years 2020-2022 the
quantity of cement sold decreased overall for the 3 companies, but we see an increase in revenue,
and as a result in fixed asset turnover, due to the increases in price of cement both locally and

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internationally, as well as higher exchange rates for exports. Lucky Cement dominates the industry
in effectively using its resources to generate revenue as it remains well above the industry average
throughout the five financial years. The Fixed Assets turnover ratio for Lucky Cement faces a sharp
decline from 2018 to 2020, reaching a low point of 1.06, still above the industry average of 0.72 at
the time. This fall was due to due to investments into a coal-based power plant project and a
Greenfield clinker production facility in Samawah, Iraq which hadn’t yet started operations. Since
then, it followed a rise with a value of 1.50, which is 0.22 off of its peak ratio value of 1.72 in 2018.
The fixed assets turnover ratio is not impressive for MLCF and even more so for DGKC, which falls
short of the industry average in all five financial years. Nonetheless, they have still managed to
improve their fixed asset turnover over the period. Thus, Lucky Cement has a considerable
competitive advantage in utilizing its plant and equipment effectively.

TOTAL ASSET TURNOVER

Just like with fixed assets, Lucky Cement has a considerable advantage compared to its competitors
in terms of effectively using its assets to generate sales. The Total Assets Turnover Ratio for Lucky
Cements remains well above the industry average for all five financial years and follows a near
identical pattern as described for fixed assets. This turnover ratio for MLCF is slightly better with it
being around the industry average in recent years, and even beating the industry average for the year
of 2022, reaching a value of 0.65. The ratio for DGKC is well below the industry average, indicating it
is not generating enough sales as per its total assets.

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DEBT MANAGEMENT RATIOS
DEBT RATIO

Debt Ratio (this ratio expressed in %) represents the proportion of total assets that are financed
through debt/conscious financing. In this case, the debt-to-asset ratio for lucky cement was stable
and below the average of the industry during the years 2018 to 2020 with a ratio of 0.08, 0.10 and
0.14, while the industry average during these years, was 0.29, 0.34, and 0.38 respectively. However,
the ratio then rose to 0.15 in 2021 and then jumped towards 0.16 in 2022 which was not a good sign
for the company as there was 200% increase in debt financing from 8% to 16% within five years. The
reason for this jump being was that lucky cement had acquired large amounts of long-term loans and
external financing from banks to begin new projects to be able to meet the demands as a result of
CPEC. DGKC and MLCF both had higher debt ratios than the industry average for the time period. The
ratio for MLCF was particularly high and increased from 2017-2020 due to them taking additional
debt to finance the grey cement line-III and line IV expansion projects.

TIMES INTEREST EARNED (TIE) RATIO

The Times Interest Earned (TIE) ratio displays how successful a company would be to meet its interest
expenses in relation to its earnings before interest and tax. During the financial year of 2019, Lucky
Cement’s TIE value substantially exceeded that of its competitors, as Lucky Cement had a ratio of
491.6 as compared to the industry average of only 15.19, indicating Lucky Cement being relatively
successful in covering its interest charges based on its earnings in 2019. However, in the forthcoming
financial year of 2020, Lucky Cement’s TIE ratio was faced with a drastic decline, yielding a value of
22.66, now much closer to the industry average. However, in future years, LUCK continued to
outperform the industry and its competitors. This can be owed to the lower debt ratio and a general
policy to avoid debt financing in LUCK, whereas MLCF and DGKC rely heavily on debt. As such, the TIE
ratio for the 2 competitors follows a similar trend.

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PROFITABILITY RATIOS
ROA (RETURN ON ASSETS)
The ROA of all cement industries showed a downward trend in the financial years of 2018 up till 2020,
where the ROA dipped to its lowest as even the industry average in 2020 was negative. However,
from 2020 onwards the ROA showed an increasing trend across all the cement industries so that
Maple Leaf Cement Factory (MLCF) recovered its ROA from -7.34% in 2020, lowest among the
companies, to 9.46% in 2021, which was greater than the industry average of 8.21%. This recovery
came as a result of greater sales, reduction in packing material costs, self-generation of power and
reduced finance costs. From 2021 onwards, the ROA across the cement industries showed minimal
fluctuation and mostly remained the same. Anyhow, it should be noted that throughout the financial
years of 2018 to 2022, Lucky Cement maintained an ROA value that was higher than the industry
average and the other companies, which is an indication that Lucky Cement was successful in utilizing
its total assets in a productive way and was comparatively better in its ability to generate profits for
shareholders through efficient allocation of total assets.

ROE (RETURN ON EQUITY)

Return on Common Equity is a ratio that displays an organization’s profits as compared to the
company’s shareholder equity. During the financial year of 2018, the ROE of Lucky Cement as well as
its competitors maintained a value close to each other as the ROE industry average value revolved
around 12-13%. However, over the next two years the ROE of Lucky Cement and its competitors
suffered a substantial decline so that the ROE of Lucky Cement dropped to a value of 2.69% in 2020,
but it was evident that its competitors such as MLCF and DG Khan Cement (DGKC) suffered a
comparatively greater blow as they had an ROE value of -12.61% and -3.34% respectively, which
brought down the industry average to a significantly low value of negative 4.55%. Anyhow, it is
noticeable that Lucky Cement and DGKC recovered their ROE value the forthcoming year and
managed to maintain this in 2022. All in all, LUCK and DGKC closely follow the industry averages, with
ROE being slightly lower than industry for DGKC and slightly higher for LUCK. However, it is observed
that MLCF showed the greatest improvement in increasing its ROE from a low level of -12.61% in
2020 to 14.91% in 2021, which shows that MLCF was successful in improving its profit margin in this
financial year. It can be seen that the ROE for MLCF is more volatile than that of its competitors,
which may be due to its high debt to equity ratio.

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NET PROFIT MARGIN

Through the financial years of 2018-2022, Lucky Cement’s profit margin suffered minimum
fluctuations with the only case of a huge decline seen in 2020. However, the industry average of Net
Profit Margin encountered several fluctuations as the value fell from 20.29% in 2018 to -5.06% in
2020, indicating that during the pandemic peak the cement industries were largely unsuccessful in
converting sales into profit. Some reasons for this include higher coal rates, power costs, devaluation
of Pak rupees and lower sales retention. However, in the forthcoming year of 2020, the industry
average of Net Profit Margin showed signs of recovery as Lucky Cement’s competitor, MLCF’s Net
Profit Margin rose greater than the industry average to a value of 17.6%, indicating its success in
increasing the amount of net income MLCF generated as a percentage of its sales. Anyhow,
continuing its volatility trend, the Net Profit Margin of MLCF decreased substantially in 2020 to a
value of 7.47%, thus falling short of Lucky Cement’s and the industry’s average, displaying its
instability and inability to consistently generate steady stream of profits over a period of time, in
relation to its revenue. The overall trend is again, due to a higher debt ratio for MLCF and DGKC,
which increases the volatility of its profitability ratios, and the recovery for MLCF is due to reasons
mentioned before in the sections above. 2021 and 2022 were still profitable years due to an increase
in cement prices, and particularly for MLCF due to their reduction in short term borrowings and other
factors mentioned above.

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OPERATING MARGIN

The Operating Margin displays the amount of earnings a company can generate before paying taxes
and interest, in relation to the number of sales the company makes. During the financial year of 2018,
Lucky Cement’s Operating Margin is 22.5%, which is roughly the same as the industry average.
Whereas Lucky Cement’s competitor, DGKC, has a greater Operating Margin than Lucky Cement in
2018, indicating its efficiency in managing its expenses which ultimately leads to maximizing its
profitability. However, in the financial years of 2019 and 2020, the Operating Margin of Lucky Cement
and its competitors decline significantly, as the Operating Margin value of the industry average falls
from 14.01% in 2019 to 0.12% in 2020. Nevertheless, in 2021, Lucky Cement and its competitors
increase their Operating Margin, as the competitor that stands out and increases its Operating
Margin by the highest amount is MLCF with a value of 24.72%, indicating the fact that operating
expenses, such as salaries and utilities are efficiently managed. Their policies for debt and reduction
of expenses allow them to go from the worst operating margin in 2020 to the best in 2021, and they
maintain their position in 2022. Furthermore, in 2022, Lucky Cement and its competitors face minimal
fluctuations except for MLCF, that encounters a decline in its Operating Margin that falls to a value
of 19.36%, displaying that it was unsuccessful in reducing its operating costs.

BASIC EARNING POWER

The same narrative as the other profitability ratios continues in BEP, with DGKC trending slightly
below the industry average, showing that there are major issues with their packaging, power and
other costs associated with production, LUCK staying consistently above industry average but still
following a similar pattern, indicating that their tried and tested policies and production lines are
efficient, and MLCF oscillating above and below the industry average, with its improvement in 2021
and 2022 reflecting that their policies have been successful at increasing EBIT and reducing cost of
sales.

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ROIC(RETURN ON INVESTED CAPITAL)

The financial statements of 2018 show that Lucky Cement had a ROIC of 2.64% that was close to the
industry average of 2.5%. However, in the forthcoming years of 2019 and 2020, it was observed that
ROIC value of cement industries declined substantially, as the industry average fell to a value of -
0.08%, displaying that the earnings before interest and tax fell significantly short not only for Lucky
Cement but also for its competing industries in the financial years of 2019 and 2020. Additionally,
Lucky Cement showed trends of increasing ROIC in the years 2021 and 2022, but it still fell below the
industry average of 3.98% in 2022, indicating that Lucky Cement should further adjust its capital
investments as well as investigate ways to increase its earnings in the future so that ROIC can be
further improved. Also, Lucky Cement’s competitor, MLCF, was highly successful in increasing its ROIC
to a value of 6.63%, which was significantly higher than the industry average. Other profitability ratios
showed a decrease in 2022 for MLCF, but the continual increase as seen in the ROIC shows that long
term debts and capital is being utilized efficiently, but there’s issues with managing and reducing
short term debts which is reducing profitability for the company. Lastly, DGKC simply trends below
the industry average similar to other profitability ratios, meaning that its issues of reduced returns
are not due to the short-term debts but instead an issue of efficient production.

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MARKET VALUE RATIOS

EPS(EARNINGS PER SHARE)

The company's profitability relative to the total number of shareholders is determined by the earning
per share ratio (EPS). In 2017, Lucky cement's EPS increased to Rs. 42.34, representing a 105% rise
over the industry average of Rs. 20.30; this significant growth is attributed to Lucky's high annual net
income figure of Rs. 13,695,893 for FY 2017. The Lucky cement EPS ratio trended downward in the
fiscal years (FY) 2018, 2019, and 2020, falling to Rs. 37.72 in 2018, Rs. 32.44 in 2019, and further
decreased to Rs. 10.34 in 2020, when the YoY net sales showed a sharp cutback of 14% in 2020
because the pandemic had severely affected the businesses and even Lucky couldn't sustain its prior
years' sales record. From the year 2021 onwards, the EPS ratio escalated to larger digits due to a huge
rise in annual net sales of the company which has reached Rs. 81,093,525 in the recent FY 2022,
almost at a 100% increase from that of 2017. Contrarily, the competitors' EPS ratio has consistently
remained below the projected industry average throughout a five-year period, fluctuated, and hasn't
been able to match Lucky Cement's EPS offering in any of those years because of the less profitability
of the competitors' businesses. In the FY 2019, we get to see negative values of EPS for DGKC and
MLCF both as the companies went in huge losses and suffered from inefficient operations. It can be
said that Lucky cement obtains an edge every year to attract an increasing number of investors since
its EPS ratio and book value ratio have consistently outperformed the industry average, and this
points to Lucky cement as the dominion in the cement sector stock market.

P/E RATIO
The Lucky cement P/E ratio shows dipping in the first two fiscal years 2018 and 2019, as it fell from
13.60 to 11.67 in 2019 when the YoY stock price was reduced by 33% and EPS by 15%. and performed
below the industry average when DGKC and MLCF had their greater ratio values of 15.39 and 17.50
in the year 2019. Later in the forthcoming fiscal year 2020, the P/E ratio value for Lucky cement hiked
to 42.54 despite the pandemic effect as the stock price increased by 21% and investors had hope for
positive future performance, although the EPS fell from Rs.32.59 to Rs.10.85 due to inefficient
operations and a decrease in sales. In contrast, the pandemic had an adverse effect on the P/E ratios
of DGKC and MLCF and their earnings went negative, so their P/E ratio and it pushed the industry

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average down to 55% YoY fall at the ratio value of 6.49. We notice a great upgrade in the P/E ratio of
both the two competitor cement companies in 2021’s ratios and both can be seen floating above the
market average as they were able to maximize their profitability whereas Lucky’s P/E ratio however
stayed above the industry average, fell by YoY 55% though their stock EPS rose to 300% increase,
from Rs. 10.85 to 43.34 in FY 2021. In 2022, all three companies’ ratios stayed close to the industry
average i.e., 9.0 however, EPS further increased this year for Lucky cement, and we can contemplate
that the stock price of Lucky cement remained undervalued in the FY 2021 as well as 2022 in
comparison with its intrinsic value.

BOOK VALUE PER SHARE

Lucky cement’s book value price per share is observing an overall handsome upsloping trend, starting
from the FY 2018 to 2022, and floating above the industry average each of the five years and this
regards to high profitability and efficient operations of Lucky cement and we get to see a similar trend
in the Lucky’s EBIT as well. Conversely, MLCF book value ratio is diving straight below the industry
average, and DGKC five years’ book value ratio is close to the industry average. The MLCF book value
per share ratio shows a stagnant but increasing trend each of the five years as due to the increase in
the company’s retention ratio and finance and production costs and decrease in overall profitability.
For DGKC, the book value ratio shifts similar to the industry average, but the overall ratio couldn’t
outperform the industry average as due to limited profitability and increase in production cost. The
yearly exponential growth of Lucky infers that the company is working efficiently in the interest of
shareholders and creating attraction for its existing as well as potential shareholders to invest
progressively.

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MARKET TO BOOK RATIO

The investors evaluate whether a company's stock price is fairly valued using the market-to-book
value ratio. Although the average industry trend has kept fluctuating above and below 1 due to the
fluctuating trend observed by the market-to-book ratios of DGKC and MLCF, the Lucky cement
Market-to-Book ratio has remained above the unit value of 1 each of the five fiscal years, indicating
that the stock price for Lucky cement never went undervalued in comparison to the book value price.
In 2018, this ratio showed a value of 1.9 for Lucky and a relatively low but stable 1.82 for Maple Leaf,
while the industry average stumbled to 1.42 that year as Dera Ghazi Khan cement's market-to-book
value ratio dropped below the value of 1. The value of this ratio for DGKC over the subsequent three
fiscal years (2019-2022) continued to remain below the industry average, which infers that the
company's stock price has remained undervalued in comparison to the book value. We can attribute
this to a lack of effective communication between DGKC's analysts and shareholders, as well as a
significant decline in the demand for its stocks. For Lucky cement, the ratio soared up to the value of
2.47 in 2021 when the market price for Lucky shares upsurged to Rs. 863.44 in comparison to the
book value price i.e., Rs. 350, stimulating the high demands of its stocks in 2021 and for MLCF, after
this ratio staying below 1 for the two consecutive FY 2019 and 2020, showed great improvement and
jumped up from 0.89 in 2020 to 1.34 in 2021 which pulled the overall industry average to 1.5 in the
fiscal year 2021. This overall increase in the market to book ratio in 2021 is due to SBP increasing
their policy rate, which revitalized the interest of investors in the stock market. Nevertheless, MLCF
has strived to maintain this ratio close to the industry average while Lucky cement outperformed the
industry average each year due to better overall profitability and more effective operations.

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DIVIDEND YIELD
After having a dividend yield ratio of 2.56 and 1.71, which was below the industry average in 2018
and 2019 respectively, Lucky Cement has had an annual dividend yield of 0 since 2020. For an industry
dominant company like Lucky Cement, it is likely that the company has stopped paying dividends
because the money that usually goes out in paying out dividends can be reinvested for the growth
and expansion of the company, which further enhances the market share price in the longer term.
MLCF, the company with the highest dividend yields previously, also has restricted itself from paying
out dividends since 2021, choosing instead to invest in projects such as Waste Heat Recovery Plant
and installation of solar power plants. DGKC had a dividend yield of 0 in 2020 due to incurring an
accounting loss for the financial year, meaning it could not pay out dividends to its shareholders.
Since, then they have had a slightly higher dividend yield ratio than the industry average in both 2021
and 2022, making it the only company we have chosen to study on which is currently paying out
dividends.

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DIVIDEND PAYOUT RATIO
This ratio works in the interest of shareholders to show the percentage of net income given to them
as dividends by the company. The dividend payout ratio remains the highest for MLCF in the first two
years of FY18 and FY19 as the company was paying around 90.3% and 73.25% of its EPS as dividends
to its shareholders, while we see a decreasing trend in the overall industry average as the two other
cement companies, Lucky Cement and DGKC, were not utilizing the maximum EPS amounts in giving
dividends and lingered below the industry average. And later in FY20, due to the pandemic crisis,
DGKC couldn’t pay dividends to its shareholders as the ratio value was nil, while MLCF managed to
pay a little credit as dividends from the company’s other accounts as the ratio showed a negative
value of -5.98%. Moreover, Lucky Cement didn’t pay dividends to its shareholders in FY20 as the ratio
value was naught, though it didn’t bear a loss but because of the globally prevailing uncertainty.
Subsequently, over the two forthcoming years, FY21 and FY22, the dividend payout ratio shows a
stagnant value of 0% for Lucky and DGKC, as these companies, having a growth-oriented nature,
preferred to reinvest the net income amount in the expansion of their operations. Nevertheless, the
industry average of this ratio showed a slim growth above the zero line in these two years as DGKC’s
dividend payout ratio rose from nil to mediocre positive values as the company’s net income showed
significant growth, and the company honored this growth by paying reasonable returns to its
shareholders alongside the retention of these earnings.

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DIVIDEND COVER RATIO
The industry average of the dividend cover ratio increased from 2018 to 2019, driven by the increase
for LUCK. This is because despite a higher EPS, LUCK gave half the dividend in 2019 compared to 2018.
The ratio decreased for DGKC but still remained above the industry average. MLCF however,
remained below the industry average due to paying a major portion of their EPS as a dividend. In
2020, LUCK and DGKC faced a severe decrease in profits, with DGKC even incurring a loss, and didn’t
pay a dividend. MLCF however, continued their policy of paying a dividend despite their losses,
resulting in a negative cover ratio of -16.71. DGKC was the only company to pay a dividend in 2021
and 2022, and the cover ratio was higher than previous years, which may be to attract investors while
also retaining most of the profits to recover from the losses in 2020.

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CONCLUSION
LUCK dominated its competitors in the liquidity ratios for 2018-2022, however MLCF had some
recovery due to policies of reducing short term borrowings. Similarly, LUCK stayed consistently above
its competitors for the turnover ratios, but the competitors and industry averages also showed a
consistent rise for Fixed asset and total asset turnovers. It is important to note however, that DGKC
had the highest receivable turnover for 2018-2020, but later faced a decline. In the debt ratios, it was
observed that MLCF has a policy of relying heavily on debt resulting in high debt ratio and low TIE,
with DGKC following similar policies but with a lower intensity. LUCK, however, has a policy of keeping
debt and financing costs low. In the profitability ratios, it was observed that LUCK has had a high
profitability and return, being the highest compared to its competitors for 2018-2020. However, after
massive decreases in profitability in 2020, MLCF has emerged as the company with the highest
profitability, owing to them reducing their power and packaging costs. For the market ratios, it is
evident that LUCK is still the giant, with high book value and market values, as well as the highest
EPS, but MLCF has had a policy of paying high dividends for 2018 and 2019, which makes them a good
investment option for dividend growth investors.

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